Binary Options Trading

Without formal education, the stock market can be a tricky place to break into. Even when trained, the stock market continues to be a risky place to make a profit. While many even go so far as to risk financial bankruptcy when investing money into the stock market, one cannot hope to gain without taking a risk. Sometimes the chance of an enormous payout can be well worth the risk of investing obscene amounts of money into the stock market.

Binary Options Trading require little or no knowledge or formal education about the stock market and how it works, as a potential investor would only be required to choose whether the price of a given or underlying asset will become higher or lower when the option eventually expires. The ease of use associated with this kind of trading may be a reason for its growth in popularity over the years.

How Binary Options Trading Works

A binary option, in financial terms, is the kind of option where the payoff can be either a fixed amount of an asset or absolutely nothing at all. As little knowledge of the stock market and how it works is required to delve into the world of Binary Options Trading, an investor would only need to determine if the price of an asset would end up higher or lower when the option expires.

What gets traded on the stock market may range from currency, commodities, indices or stocks, but they are all collectively known as underlying assets. Buying these underlying assets is not an obligation on the part of the buyer.

Fees and Rebates from Binary Options Trading

Common binary options platforms do not facilitate or enforce any charge or direct fees on investors who wish to buy options. Profits paid out to the investors on the time of asset expiry may vary greatly. Rebates of nothing to 15% are usually given for an incorrect prediction on his investment. The minimum amount of investment for any platform is usually set at about US$10. Any money invested cannot be pulled out until the binary expires.

For example, a trader chooses a Starbucks stock, and believes that the value of the stock will close below the current price of 21.12 by the end of the hour, with a return rate of 40%. An investment of US$1,000 is made on the part of the trader. If the prediction turns out correct, the trader may earn up to 70% of profit, making a total of $1400 paid to the investor. However, if the trader is incorrect, he loses money but may get a rebate of 15%, or $150.

Pros and Cons of Binary Options Trading
Binary options trading remains an easy way to break into the stock market not only because of the relative ease of use, but because a sense of direction for which the asset can be developed while trading. Profits are made regardless of the magnitude of the direction shift; as long as the asset value moves in the direction intended, the buyer will receive a payout.

The two possible outcomes are, more often than not, pre determined by the buyer depending on the amount of the investment, making any risks involved relatively controlled in nature. Due to varying expiry times, availability of multiple kinds of underlying assets and the ability to trade online without the assistance of a trained broker, binary options trading is as flexible as it is easy.

According to a July 2010 article on Forbes, binary options trading can be considered as a “crapshoot” as opposed to an actual investment. The ease of use makes it easier to end up with a negative payout rather than gain any profit.

Platforms which offer binary options trading have not been regulated until recently. Many platforms may have the risks outlined any forms that are required to be signed by the potential buyer or investor, and while they may be on the form itself, the risks may not be as explicitly stated as the promise of profit is.

According to an article on Investopedia.com, a select few states have developed support for the binary options sector, such as Chicago with started the Chicago Board Options Exchange or CBOE, but still only offer limited protection under the Securities and Exchange Commission.
Should anything go wrong with any funds used by investors, there are no regulations that require organizations to keep trust accounts or other means of insuring an investor’s money. Markets that deal in binary options trading are also unregulated, making oversight for trade problems and discrepancies difficult.

This makes it easy for potential investors to find themselves susceptible to unscrupulous business practices, despite brokers using big external sources for quoting purposes. As no underlying asset is really owned, binary trading options may simply a bet on which direction an underlying asset may take.

Binary options provide an easy to use alternative to speculating or even hedging, but the risks involved should still be carefully considered. The known risk and possible profits, access to any underling asset combined with the commission-free nature can be considered to be positives. The lack of true asset ownership, as well as the near-complete lack of a regulatory body can make winning payouts turn into financial disasters by investors with unethical business practices. It is always important to read the fine print before diving into anything, especially one that deals with as much money and assets as binary options trading does.

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